Tesla’s China factory could hit a roadblock over disagreement in ownership

Tesla and the Chinese government are reportedly not seeing eye-to-eye with regards to the ownership of the electric car maker’s proposed factory in Shanghai.

The planned electric car facility in Shanghai is widely believed to be the site where the production of the Model Y, Tesla’s crossover SUV, and Model 3 will happen. Just last year, reports emerged that Tesla had already secured approval from the Shanghai municipal government to operate the planned facility in the region’s free-trade zone. By then, it seemed like Tesla’s China factory was well on its way to becoming a reality.

According to individuals who claim to have direct knowledge of the matter, however, Tesla and Shanghai officials have disagreed about the ownership of the proposed electric car factory. The Chinese regulations were reportedly firm on their rule of requiring foreign car makers to engage in a joint venture with a local firm. Tesla, however, is firmly opposed to the idea and would like sole ownership of the facility, according to a Bloomberg report.

Tesla’s difficulties with the Chinese government have resulted in several drawbacks for the California-based electric car maker. Due to its cars not being manufactured in China, its vehicles have been weighed down in the market with a steep 25% import tax, making them far more expensive than electric car offerings from local competitors.

Tesla’s disadvantage on pricing appears to have become a huge opening for local electric car makers. China currently has seen sales of 449,431 electric vehicles to date, and only 14,883 of these were Teslas. The rest of the number is dominated by two of China’s biggest local electric car makers, Beijing Electric Vehicle Co., which has sold 102,341 cars, and BYD, which has sold 33,220 vehicles so far. Both these local electric car makers offer vehicles that are significantly more affordable than Tesla’s lineup.

Despite these disadvantages and the reported problems on its upcoming factory in the country, however, Tesla has not slowed down its initiatives in the Asian economic superpower. As we noted in a previous report, China has recently upgraded its Supercharger station in Beijing, equipping the location with 50 stalls and making it the largest Tesla charging facility to date.

The California-based firm has been quite vocal about its intentions of saturating the Chinese electric car market as well. As we noted in a previous report, Tesla CEO Elon Musk stated that the Model Y crossover SUV and a part of the Model 3 production might be sourced from China. In a Q&A call with analysts last year, the Tesla CEO noted that having a China-based facility is one of the most effective ways to ensure that the company remains competitive in the region.

“(Tesla) won’t be making Model S and Model X, but we’ll be making probably Model 3, probably Model Y primarily for the local Chinese market and it’s really the only way to make the cars affordable in China, but it’s three years out, so,” Musk said.

Tesla’s China factory could hit a roadblock over disagreement in ownership